US Asset Management Review
Presented to UK Followers October 2003 Scott F. Powers
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Overview and Strategy
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Pre-Acquisition: United Asset Management
Founded in 1980 47 Affiliates 6th largest independent asset management group in world Diversified by asset class and client base Strong operating cash flow Strong foothold for Old Mutual in U.S.
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Pre-Acquisition Assets Under Management
$ billions
$250 198 $200 152 $150 104 $100 171 201 203 178
$50
$0 1994 1995 1996 1997 1998 1999 2000
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Pre-Acquisition Client Cash Flows
$billions ($ billions)
1994 0 1995 1996 1997 1998 1999 2000
-5
(6.3)
(3.3)
-10
(8.7)
-15
(16.1) (15.1)
-20
(19.8) (21.1)
-25
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Old Mutual plc
An International Financial Service Company $199 billion in assets under management 3.8 million South African customer bank accounts 46,000 employees worldwide
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Old Mutual plc Progress on Internationalisation – 2002
Life new business (APE) 4% 42% 54% Funds under management Operating profit 7% 22% 19% 22% 59% 71%
USA
UK & Rest
South Africa
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Group Operating Profit (local currency)
2002 2001
% change
South Africa
Rm
9,016
9,536
-5
UK & Rest of World £m
(1)
(5)
+80
USA $m
266
186
+43
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US – Operating Profit
$m 2002 2001 % change
Life assurance*
124
19
n/a
Asset management
142
167
-15
___________________________________________________ Operating profit Operating profit (£m) 266 178 186 129 +43 +38
* 2001 represented a 6 month period and includes $13M transitional charges related to purchase of Fidelity & Guaranty.
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Old Mutual Asset Management
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Reporting Structure
Scott Powers Chief Executive Officer Kevin Hunt Chief Sales & Marketing Officer
Dave Hegger: Relationship Management
Tom Turpin Chief Operating Officer
Linda Gibson: Legal
Old Mutual Asset Management CEOs
Brian Baskir: Consultant Relations
John Grady: Finance
Jeff Howkins: Risk Management/Audit Rose Turiello: Marketing Tom McLain: Technology George Vogel: Distribution Elaine DeHority: Tax Lou Chrostowski: Human Resources
Matt Appelstein: Product Development
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Old Mutual Asset Management
Sharpening focus Positioning for growth Value-added partnering
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The Traditional Trade-off
Organization Structure
Conglomerate/ Generalist Independent/ Specialist
Pro Wide product range Deep resources Economic efficiencies Distribution leverage
Con Lack of investment focus Difficulty attracting and retaining top investment talent
Pro Client alignment Investment focus Investment Process autonomy High quality investment talent
Con Sparse resources Cyclical economics Lack of broad distribution
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The Best of Both Worlds
Organization Structure
Conglomerate/ Generalist Independent/ Specialist
Wide product range Deep resources Economic efficiencies Distribution leverage
Client alignment Investment focus Investment process autonomy High quality investment talent
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Sharpening of Focus
# of Affiliates
47 50 40 25 30 20 10 0 12/31/2000 12/31/2002 6/30/2003 21
200 180 160 140 120 100 80 60 40 20 0 178
AUM $billions
127
136
12/31/2000
12/31/2002
6/30/2003
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Asset Management Organization
Asset Management
(AUM $136bn)
Acadian Asset Management Analytic Investors Inc Barrow Hanley Mewhinney & Strauss Clay Finlay International Dwight Asset Management eSecLending First Pacific Advisors Heitman Financial Services Lincluden OSV Partners (Germany) Pacific Financial Research Pilgrim Baxter & Associates Provident Investment Counsel Rogge Global Partners (UK) Sirach Capital The Campbell Group The L&B Group Thompson Siegel & Walmsley Thomson Horstmann & Bryant
$3.0bn $2.4bn $28.5bn $5.7bn $37.0bn $4.3bn $6.7bn $2.2bn $1.0bn $15.0bn $6.9bn $5.3bn $5.7bn $2.0bn $1.5bn $2.0bn $4.4bn $1.9bn
Management & Distribution Old Mutual Investment Partners PBHG Funds Integra Capital Management (Canada) UAM (Japan)
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Sharpening of Focus
# of Investment Products *
# of Investment Products *
140 120 100 80 60 40 20 0 124 84 77
1900 2000 1500 1000 500 0
# of Employees
# of Em ployees
1276
1247
2000
2002
6/30/2003
2000
2002
6/30/2003
*Products with 5 year trailing performance
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Total Assets Under Management
$136 billion June 30, 2003
Core Equity 3% Growth Equity 8% Alternative Investments/Other 11%
Sub-Advisory 25%
Corporate 30%
Value Equity 35%
Fixed Income 36%
Insurance 10% Taft-Hartley 3%
Endowment/ Foundation 4% Public 12% Managed Account 2% Individual 1%
International Equity 7%
Mutual Fund 13%
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Positioning for Growth
Support unique, disciplined investment processes at individual firms Retain entrepreneurial cultures Align incentives for profitable growth Investing in affiliate sales force Establish centralized managed account sales force Strengthen retail distribution platform Leverage distribution synergies with Old Mutual
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Cash Flow Activity Since Acquisition
$91,624 ( $81,949)
300,000
250,000
$200,043
( $24,006) ( $49,627)
200,000
$136,085
150,000
100,000
50,000
0 AUM 9/30/00 Inflows Outflows Market Impact Disposition AUM 6/30/03
$9.7B net cash inflows •Turbulent market environment
Activity attributable to sold firms
•25% of beginning AUM sold
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Positioning for Growth
Net Cash Flow $billion
$10 $5 $0 ($5) ($10) ($15) ($20) ($15) 12/31/2000 12/31/2002 6/30/2003 $5.1 1.9
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Competitive Comparison
AUM 6/30/03 # of firms Cash flows 1/1/01 - 6/30/03 relative to BOP AUM Market appreciation relative to BOP AUM
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Value Added
Support affiliates with new product development Strengthen relationships with the US investment consulting community Assist with centralized distribution Provide technology assistance Offer human resources support Perform legal and compliance oversight and best practices
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Old Mutual Asset Management – Operating Partnership
Affiliates
Core Focus
Investment Strategy
Old Mutual (US) Asset Mgmt
Current Challenges Not fully benefiting from: - Size - Scale - Scope of organization Future Opportunities Best practices Gain efficiencies Access new opportunities - Coordinated distribution - Increased efficiencies
Responsibilities
Process
Execution
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Achievements
Restructured organization under single management team to support organic growth with diversified asset mix Sold or restructured twenty firms Strengthened senior management team Completed outsourcing of UAM Funds administration to SEI Created central wrap sales force with Provident Investment Counsel and Thompson, Siegel & Walmsley resources Completed rollout of seven new sub-advised PBHG funds
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Current Challenges
Exploit current strength in institutional market Invest in selective retail growth opportunities Achieve incremental net fund inflow of $5 billion in 2003; Grow pre-tax operating earnings Strengthen suite of investment products Create a single asset management organization
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Summary
Financially secure parent organization Committed to managed growth in asset management business Value investment independence of member firms Provide value-added resources in non-core areas Aligned with member firms to exceed client objective
Entrepreneurial investment professionals backed by a stable organization
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